Before you get the wrong idea about this post, let me start by saying that I am a huge advocate of learning both before and while doing anything new with real estate investing. I’ve invested plenty of dollars on solid education and mentoring over the years and will continue to make these investments for years to come. There are unlimited options available for e-books, home study courses, systems, and mentoring programs. Many of these products are excellent and will provide you with enough education to get started and be successful. Other products? Well, perhaps not so much.

With these seemingly unlimited options, I was truly overwhelmed when I was first getting started in real estate investing. Everything sounded like an awesome opportunity for success and I didn’t know who to trust, what product to buy, whether I should buy anything at all!

I know that I’m not alone here so I thought I’d share a few of my thoughts on what you should consider before buying any system, course, mentoring program, or e-book.

Ask yourself “What was the last training product I purchased, and is it collecting dust on my bookshelf?”

If the answer is “Yes, its collecting dust on my bookshelf” go pick that sucker up, dust it off, and read it again. Unless it’s a complete piece of junk, take action with what you already have available! Grass always looks greener on the other side when you’re seeing examples of other’s success, but try out what you have! Your issue may not be lack of education, but rather fear and/or lack of action.

Ask yourself “Do I get excited and feel inclined to purchase every time I watch a new webinar, see the pictures of huge checks, and read the super long sales pages?”

Do yourself a favor and be honest about this (nobody else will know)! Effective sales letters and videos for products – whether they are awesome or a piece of junk – are designed to evoke emotions out of you. Don’t lose your head! If you’re the type of person who gets excited each and every time and quick to pull out your wallet, you have to be doubly careful.

My advice is to do a little free research online on the various ways to get started in real estate and ask questions (again for free!) in some real estate investing forums first. After you’ve done that, then you should begin to take a look at the product options in your area of interest so that you can follow the lead of someone who was successful in that area.

Once you’re determined your area of focus and are ready to invest in education, consider your available resources

The truth is that you do not need to spend thousands of dollars up front on real estate education. There are so many options available that will cost no more than a couple hundred dollars and can get you started. Once you’re at the point where you have more resources available to you, you may want to consider spending more on an advanced level of real estate education and/or mentoring to help you get to the next level.

Remember, success in real estate investing results primarily from acquired knowledge, a positive attitude, and massive focused action. No course, e-book, or system runs by itself without work from numero uno (yep, that’s you). Once you’ve found something that works for you, don’t let Negative Nellies tell you “I bought that and it didn’t work for me” without questioning them on the actions that they took to be successful.

I wish you the best and encourage any comments or other suggestions below!

Photo credit: dslrninja

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Wait! Before You Buy That Real Estate Course or E-book…

Many investors never acquire any level of comfort with investing in real estate.  They wander from strategy to strategy, read, learn and attend every event they can and then?  Nothing. They do nothing and cannot overcome their sense of fear. 

Here are some steps to overcome your fears and to get you on the fast track towards success.

1.  Start with goals – Write down your goals daily, what it takes to achieve them and start completing those tasks.  Do this everyday and you will be amazed how organized, efficient and effective you become.

2.  Pick one strategy and master it – I see it all the time; beginning investors put a half hearted effort into 10 different strategies and end up doing nothing.  Instead, pick one and become a master at it.  I cannot stress this enough! 

3.  Document your strategy in a detailed business plan – When investors tell me their strategy, I am always intrigued and ask how they are going to do it, and if they have a business plan.  Almost none of them do.  Even if yours is a 1 page business plan, at least you have some kind of documented strategy; that said, you should be as detailed as possible.  In this business plan you need to have goals, strategy, criteria, exit strategies, market research, how you’re going to find deals, your marketing plan, how you are going to execute deals, your team and your systems.  My first plan was a page and a half.  I revised it to 3 pages, then 13 pages; now it is almost 40 pages.

4.  Build your team and systems – Build your team and formally formulate your systems so you can duplicate your successes on different deals.

5.  Find an expert mentor in your strategy - Have a mentor and expert in your strategy advise you on your business plan and deals.  You can even partner with them until you overcome your fear.

6.  Do – At this point you have no excuse but to DO and achieve success.  If you have not found success at this point, start over at #1.

Photo: vincepal

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Fear, what to do when fear is holding you back

There are a lot of mistakes that can be made in Real Estate. In fact, many savvy investors still make mistakes or have overcome huge mistakes in their investing careers. The keys are to recognize, avoid, learn and move forward from these potential pitfalls.

Here are 7 Key Mistakes Beginner Real Estate Investors Make.

1. Speculate – Most new investors follow the herd, listen to the media and buy with the hope the property will appreciate. This is as much of a gamble as hand picking stocks or going to the Casino. Buy below market properties that cash flow.
2. Buy at Market Value – Beginners almost always buy property straight off the MLS for market value. You can find deals in any market and there are always distressed properties. Cherry pick from distressed properties at 70% or less of market value.
3. Fall in love with a deal and get your emotions involved – Many beginners are guilty of this one. Their first few deals they spend minimal time finding a deal. As soon as a prospect is located, they fall in love and do anything to get that property. Emotions drive the decision, instead of making an informed business decision. Key is to get as many prospects that fit the criteria into the pipeline, filter out the duds and cherry pick only the best deals.
4. Put too much down or too much of your own money – Real estate is an OPM or Other People’s Money industry. You should minimize how much of your own money is in a deal. And always make sure you have plenty of reserves to handle any not so pleasant surprises.
5. Only have one exit strategy – To minimize risk, it is imperative to have multiple exit strategies. If you cannot flip a property you can quickly end up upside down, behind in payments and lose the property and your credit. Instead, buy below market properties that cash flow. That way you can sell retail, wholesale, lease option, seller finance, refinance, even rent and hold.
6. Buy in Warzones – It is wish to buy property at a deep discount. In today’s market you can find huge discounts in many areas with the glut of foreclosures. Do your due diligence. Buying a property for 20K worth 80K sounds like a slam dunk, but not if the property is vandalized multiple times during repairs, surrounded by 20 other foreclosed properties and there is next to zero interest from renters or buyers due to the location in or near a warzone. Make sure there is strong demand from renters and/or ownership in the area.
7. Do not consult an expert or build a team – Many people are do-it-yourselfers and cannot fathom the idea of another person giving them advice or handling tasks. Real estate can be very passive if you build a solid team and many experts are more than willing to give you advice that could significantly impact your success and experience as a beginner.

Many gurus make real estate investing sound so easy.

News flash, it is not.

Many beginners make one, even all of the above mistakes and have a miserable first time investing experience. Whether you are a beginner or an expert, it is always a great idea to get as many expert opinions as you can. They will make you aware of many potential mistakes and red flags. Play the numbers game and cherry pick from as many prospects that meet your criteria as possible. Also always do extremely thorough due diligence. And finally, happy and profitable investing!!

Photo Credit: jurvetson

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

7 Beginner Real Estate Investing Mistakes to Avoid

Remember those days when you had the first ideas for your real estate business? For some that seems like eons ago while others may just now be in the beginning stages of their business. For many those ideas never escape the confines of the cranium and some will scribble ideas on a napkin as they sit at their favorite watering hole. Hopefully those plans eventually made it to paper or, better yet, became a formal business plan.

Unfortunately for many, those plans that were so carefully crafted are soon forgotten. The mission statement, goals and objectives, strategy and such are collecting dust somewhere. Unless it is needed for some proposal or financing it is never looked at again. What happened?

Reality Strikes

People will often start out methodically following the steps in their business plan. They begin with the ultimate goal in mind and set off on the journey to realize their dreams. If they are committed to their goals they keep going while experiencing the ups and downs and challenges that come their way. Things move along as expected for a time but soon enough something happens. Reality enters the picture.

Somewhere along the line we seem to go from the relentless pursuit of our goals to putting out the little fires that pop up at every turn. Those fires are simply the reality of everyday life. They have always been there and will always be pulling you away from your intended path. In the recent real estate environment those fires have been roaring blazes. Foreclosures, falling prices, and difficult to obtain credit have wreaked havoc with business plans everywhere. What now batman?

Reevaluate & Revise

A good business plan is not a static document, it is a living, breathing organism. As such it needs to be nurtured, fed and cared for. If you have a written business plan, take it out and look at it. Have your goals and objectives changed? Odds are that your strategy has, have you adapted your strategy to fit today’s reality? If you haven’t put a plan to paper what are you waiting for?

A typical plan has the following elements:

• Mission Statement
• Executive Summary
• Goals & Objective
• Market Analysis
• Strategy
• Financials

Without a doubt the most important step is taking those elements and implementing them. If you don’t put the plan into action it’s just a bunch of wasted ink and dead trees.

You’ve got to be very careful if you don’t know where you’re going, because you might not get there. – Yogi Berra

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Revisiting Your Business Plan

1. Real Estate Principles for the New Economy by Miller/Geltner

2. Real Estate Finance and Investments by Brueggeman/Fisher

3. The Appraisal of Real Estate by the Appraisal Institute

4.Investment Analysis for Real Estate Decisions by Greer/Farrell

5. Property Management in Real Estate Investment Decision-making by Jaffe

6. Macroeconomics by N. Gregory Mankiw

Real Estate Principles gives a great overview of the Real Estate Industry.  Readers will understand what drives Real Estate markets in the short, intermediate, and long run, connections between the Capital Markets and the Physical Markets, and Residential and Commercial property analysis.  The effects of the legal and regulatory environment are explored, as well as financing, cash-flow analysis, and models.

Real Estate Finance provides a similarly broad perspective but with a more sophisticated discussion concerning factors affecting financial decisions.  A larger portion is devoted towards income-producing properties, tax treatments, equity financing, effects on portfolio management, the secondary mortgage market, and investment decisions.

The Appraisal of Real Estate goes into great depth in discussing what the role of an appraiser is and how to conduct an appraisal.  I often hear from other Realtors and investors about how unreliable appraisers are.  When asked if they understand how appraisers work, their methodology, how they gather data and process it, I’m usually met with blank stares.  There is much more to appraising then simply looking at comparable properties or doing a quick cash flow analysis.

Investment Analysis is the book EVERYONE should read.  You need to have a firm understanding of the underlying principals covered in the above books in order to grasp the concepts in this one.  Greer/Farrel cover Market Efficiency, land utilization, market research and forecasting, traditional and contemporary valuation and risk measures.  Learn how to conduct a feasibility report, interpret probability distributions, utilize a mean/standard deviation approach, and discover why the certainty-equivalent techniques have issues.

Property Management is a great short read where Jaffe examines the literature of Real Estate Investment Modeling, investigates data analysis, sensitivity analysis, and how management decisions affect overall value.  Whether you agree or not with his conclusions, taking the time to see how he systematically analyzes the effects of management will help you develop your own analytical methods.

Macroeconomics exerts such an influence over the national and global economy.  Especially in these uncertain times, it is important to have a grasp of how fiscal and monetary policies shape the short and long run rate of output.  The recent credit and economic crisis has shown how important an understanding of globalization and the interconnectivity of all the various markets are.  If you believe that your investment property is influenced only by local market factors, think again.

Photo Credit: faeryan

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

6 Must Reads for New Real Estate Investors

I know I write about this a lot – but I think it’s important to keep this message in the forefront for all the newer investors out there and even some of us not so newbies.  The endless emails and direct mailing pieces I get that sell me on the next big, most important, I must not miss sell-a-thon from real estate gurus – is nauseating!  Gag me with a spoon!

I cannot believe the horrible trend that is happening that all the old gurus and new gurus are perpetuating.  And to make it WORSE (can it actually be any worse?), they not only send us endless sales pitches on their own product – they are getting bigger and bigger into affiliate marketing which means that they are letting us in “a secret”, or giving us “the insiders track”, or getting us a deal that only they can give us because this guru is “their good friend”… blah blah blah blah…..  gag me with a spoon!  (Did I say that already?)

What the heck is going on with this industry?  Really I wish I had the answer.  I cannot stand this b.s.!  I am a real estate club owner and I have to spend a lot of time convincing new people that our club is different -   that we don’t do pitch fest. It’s so sad how these gurus have made what we do - so distrustful.  So what’s the solution?  How do we stop the madness?  Well – I know what I am doing to stop it – but I need your help too!

For instance – I will never book one of these guru pitch festers to speak at my club.  Maybe right now – those big shots don’t care – after all, I am a new club and how much influence can I possibly have right?  Well, after my meetings this week – I had a 100 people attend my “little club” meetings this week.  Not so bad for a silly little girl who’s club only started 6 months ago. My goal is to continue to spread the word that we do not need to spend thousands of dollars A MONTH in order to learn real estate! Even if I do wake up with a bloody horse head in my bed someday! I will not be intimidated by your sneers – you “older, wiser and more successful” gurus and owners of real estate clubs! 

Newbie Alert:  Did you know that 95% of folks who buy endless guru products never learn the solid foundation that they need in order to be a successful real estate investor?   Why – because many of these products are a trap! Not all (there are a some good ones out there), but many of these products are just a way for the gurus to get their hooks in you so they can up sell you to their next product or bootcamp – ENDLESSLY. 

A few simple tips to follow to stay out of the “seminar junkie” trap:

1.  Ask your SUCCESSFUL (successful being the key word here), investor friends – who they studied from, who’s product taught them a lot, who they trust.  Then buy that program or bootcamp. If you are new and don’t have investor friends yet, join forums such as BiggerPockets and ask around.

2.  If you go to a seminar that was not recommended to you by someone you trust – then leave your wallet at HOME.  Don’t leave it in the car – because it’s too easy to run down and get it once these slickity slick slicks have hypnotize you into believing that you cannot succeed without them and their product!

3.  Decide what real estate strategy you want to be an expert at and stick to it!  Do not deviate and start dabbling in the next big strategy that is being pitched by the guru of the week.  This should help you stay focused and deter you from buying product on strategies that are not within your business plan.  Now mind you – as markets change, strategies change – I know this, but you do not need to know how to do everything single strategy right now.  You only need to know specific strategies depending on that current market!  Mr. Bruce Norris is the best at teaching us this.  He will never try and sell you one of his products if it doesn’t pertain to the specific market that is happening now.

4.  If you simply must buy a product - first check with your friends to see if they have it.  Maybe you have something they would like to study and you can exchange product for a while.  Or check with your local real estate club – some have a lending library.  

5.  Get a mentor!  Find a successful real estate investor who is doing deals now.  Personally – I would have been lost without my mentors and coaches.  I have learned more from successful – down to earth, REAL – real estate investors than from most of the product that I have bought.  Actually – the best product I have ever studied from was from a few of my mentors.

6.  Attend your local real estate club – as long as it is not a pitch and sell environment.  Stay away from those!  Yucky! (That is why I started my own club!  Cuz I couldn’t stand to be around that kind of environment a minute longer!)

The bottom line is that there is a reason these pitch festers continue to market like dogs in heat – it’s because people buy. When gurus sell $100K in product at seminars like these only a few of those people who bought will ever do a deal – they don’t care!  They know that most everyone in the room will not be successful.  It’s not about that to them.  All it’s about is making as much money off you as possible.  Sell – the poor bastards the dream….  That’s what they do.  

The answer is get educated yes – but also, get support, get trained, surround yourself with successful investors, and don’t be hypnotized by the smoke and mirrors (think of them as the Wizard in Wizard of Oz – that might help!)

Photo Credit: Jorge Bassy

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Don’t be hypnotized by the “Guru of the Week”!

I screwed myself at the grocery store again. I bought 24 cans of Spaghettio’s (no, I don’t care if that’s the correct spelling) because they were on sale two for one. Well, I finally ate a can yesterday and it was terrible. As in, I didn’t even eat it all and I will eat almost anything. I’m not a picky guy at all, but it tasted like cardboard and dead rat. So now I’m stuck with 23 cans of Spaghettio’s. (Would I be a bad person if I donated them to the homeless? I think if I was homeless I would be motivated enough for food, to eat dead rat, cardboard Spaghettio’s…there’s only one way to find out).

Anyway, before I do my good deed for the week and poison the homeless, let’s talk about this excellent market we’re in. Because, as John D. Rockefeller said, “Buy when the blood is running in the streets.” Well, as we all know opportunity is KNOCKING loud and clear for us real estate investors. For people who have been in this game a while (meaning around five years) you remember the hot market when people had 16 contracts on a house by noon. In this market, it’s like shooting fish in a barrel. I think this market is actually making me lazy because it’s so easy to find motivated sellers and deals.

So how do you clean up right now?

As a good friend of mine says, “You can’t be a one trick pony.” You need to wholesale to get cash now. But also, the big money to be made is buying and holding. Pick up 20 properties this year (which isn’t tough if you do lease options and subject-to), hold onto these properties for five years and you will make a life changing amount of money when you sell.

And, if you haven’t learned the subject-to strategy, start learning today. If I had tried going through banks when I first started, I would never have been able to purchase millions of dollars in property (it still boggles my mind the thought of putting 20% or even 10% down on a property).

Please think big and please think positive during this buyer’s real estate market. The size of your thinking determines the size of your bank account (I can’t remember who said that, or else I’d give them credit…adios).

P.S. Next week, I’m going to reveal some of the most important clauses in my
subject-to contract which help CYA and save me a ton of money.

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Are You A One Trick Pony? How to Profit in Today’s Real Estate Environment.